Most business owners want to: build wealth and maximize the value of what is left behind for heirs; protect their wealth to insure that what they have spent a lifetime building isn't eaten away by taxes, inflation and/or the cost of medical care; distribute their wealth so that their loved ones may be taken care of, and see to it that their assets and possessions go where they want them to go in the time frame they want this to happen. This is the essence of estate planning.

A welfare benefit plan is possibly the only way estate planning can be done on a tax deductible basis and money for other purposes can come out tax free. Among other things, it makes the cost of life insurance a tax deduction, and allows wealth to pass income and estate tax free.

Eventually the business owner leaves the business. If a family member or employee can buy the established business, planning needs to be done years in advance for the best possible results.

If an outside buyer is desired, the company should be positioned so that, if a favorable opportunity arises or an unfortunate event occurs, the company is completely ready for transition. In other words, the business should be ready for sale versus up for sale.

Determining the value of a business is an art. There are no fixed rules, just general guidelines. All characteristics of the business must be considered. The value, however, is ultimately what a buyer will pay considering all relevant circumstances and bargaining at arms length. This is referred to as the fair market value.

Non-cash PaymentToday's would-be sellers are seeing attractive purchase prices offered in currencies other than cash. The purchase might be part cash, and the remainder an unsecured promissory note. But cash is the only sure thing.

Should the business falter, the remainder of the purchase price may evaporate or become subject to litigation. A sale to the highest bidder is not always the most appropriate sale.

Make Plans for the futureMost small business owners are so busy running the company they fail to plan for the eventual transfer of the business. By not planning, they jeopardize the futures of the business and, possibly, of his or her family. We are often consulted at this time, but, at this point, it is almost too late to help.

Succession and estate planning involves various questions of tax, law and business planning. The business owner(s) should make the final decisions after being provided with various types of information. If planning is done early, the process is not difficult and the results are maximized. No one plans to fail, but many fail to plan.

Lance Wallach speaks and writes extensively about WBPs, retirement plans, and tax reduction strategies. He speaks at more than 70 conventions annually, writes for 50 publications and was the National Society of Accountants Speaker of the Year. For more information and additional articles on these subjects, call (516)938-5007 or email lawallach@aol.com..

The information provided herein is not intended as legal, accounting, financial, or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Why You Should Stay Away from Section 79 Life Insurance Plans By Lance Wallach, CLU, CHFC

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I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income.

Unfortunately for these unsuspecting doctors, what they don’t know is that not only are Section 79 plans not the best wealth-building tool they can use, they are not even a good wealth-building tool.

I have problems with Section 79 plans for several reasons:

1. You have to lie to employees to implement them. Most try to exclude workers.

2. The life illustrations given by ignorant or crooked insurance agents are not realistic. Most use today’s historically low lending rates with 2 percent to 3 percent loan spreads on variable loans on EIUL policies (ones that do not have a fixed lending rate).

3. You have to be a C-corporation to use them. Many agents don’t inform their clients of this.

4. The life policies sold in these plans are so bad that the companies don’t want them sold unless they are in Section 79 plans. (The policies are designed to have poor performance so the deduction is increased.) This is similar to the springing cash value problems with the 412i and 419 plans that got people audited and sued.

5. Another very good reason not to use these plans is because there are better alternatives.

6. Another reason not to use a Section 79 plan is because when you run the real numbers, the client would be better off not funding the plan, taking his/her money home after taxes, and funding a good no load EIUL policy.

7. The IRS audits many of them and unless you properly file under IRS 6707A the fines are very large.

ABOUT THE AUTHOR: Lance WallachLance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR and captive insurance plans. He speaks at more than ten conventions annually, writes for more than 50 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s “All Things Considered” and others.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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About Me

Lance Wallach, was a leading registered representative, insurance and annuity adviser for Mutual Benefit Life and later for New England Life. He advised thousands of high income clients on annuities, life insurance, and health insurance. Lance also counseled famous Wall Street luminaries such as Hugh Downs and Louis Rukeyser (host of long-running television programs Wall Street Week with Louis Rukeyser and Louis Rukeyser’s Wall Street). Government officials have also sought Lance’s advice, including; Corman G. Franklin of the Office of Assistant Secretary for Policy US Department of Labor and Jon S. Havicon, an Internal Revenue Service Agent.

Mr. Wallach is a member of the AICPA faculty of teaching professionals & a renowned national expert in many court cases. He is the author of many best-selling financial & financial law books.